President Joe Biden made a campaign pledge to forgive $10,000 in federal student loans. In August 2022, Biden announced that he would fulfill that pledge and offer $10,000 in student-loan forgiveness to anyone whose income is less than $125,000. People who received Pell grants while in college are eligible for $20,000 in student-debt relief.
Biden's Department of Education immediately began accepting applications for loan forgiveness. As of late last month, 26 million college borrowers filled out online applications.
Critics said that Biden was giving a benefit to people who don't need it. People who took out student loans to get a college diploma or a professional degree may very well be able to repay the debt. Critics also said that Biden is requiring blue-collar taxpayers who did not go to college to absorb the cost of loan forgiveness that benefited people who did go to college.
Then the lawsuits started. Earlier this week, the Eighth Circuit Court of Appeals blocked Biden's program from being implemented nationwide.
Last week, in Brown v. Department of Education, Federal Judge Mark Pittman issued an important opinion on a challenge to Biden's student-loan forgiveness plan. Judge Pittman ruled that Biden's executive action was "unlawful" and vacated the entire program.
The Department of Education speedily appealed Judge Pittman's ruling to the Fifth Circuit Court of Appeals. The Fifth Circuit is generally considered a conservative or moderate court, and I think it is likely that the court will uphold Judge Pittman.
Other cases will be filed in the coming months, and other judges may rule differently from Judge Pittman. If so, the legality of President Biden's $400 billion giveaway will go to the Supreme Court.
I predict President Biden's ill-considered bonanza will ultimately go down in flames like a World War II fighter plane in a vintage war movie.
First, DOE's primary argument appears to be that no one can challenge Biden's giveaway because no one was injured by it–it's just free money.
But that's absurd. The Congressional Budget Office calculates that the program will cost $400 billion, and a Wharton School analysis predicts it will cost about a trillion bucks. The consequences to American taxpayers are enormous.
As Judge Pittman observed:
[N]o one can plausibly deny that it is one of the largest delegations of legislative power to the executive branch or one of the largest exercises of legislative power without congressional authority in the history of the United States.
Second, even Representative Nancy Pelosi, Speaker of the House, flatly said that President Biden does not have the legal authority to forgive a portion of student debt owed by more than 30 million people.
People think that the President of the United States has the power for debt forgiveness. . . He does not. He can postpone, he can delay, but he does not have that power. That has to be [accomplished through] an act of Congress.
Finally, the plaintiffs argued that DOE launched its giveaway in violation of the Administrative Procedure Act because it failed to comply with the notice-and-comment period that the APA required. That's an excellent argument.
Betsy DeVos, President Trump's Education Secretary, lost dozens of lawsuits because DeVos's DOE tinkered with the federal student loan program without complying with the APA. Many of those court decisions will be precedents in support of the plaintiffs challenging Biden's precipitous actions.
The federal student loan program is a trainwreck, and millions of Americans deserve relief from college loans they can never repay. But any relief program should be fair and motivated by sound public policy–not reckless handouts to cater to a political constituency.
Congress would take a giant step toward reforming the student loan program if it took just two words out of the Bankruptcy Code. Those two words are "undue hardship."
Honest but unfortunate college borrowers who are insolvent should have their student loans discharged through bankruptcy like any other nonsecured debt.
Apparently, that simple and fair solution is too difficult for our politicians in Washington to grasp. Thus (with apologies to Eugene O'Neill), Biden's student-loan forgiveness fiasco begins a long day's journey into the dark night of protracted litigation in the federal courts.